The Florida Property Insurance Crisis—What You Need to Know
Ouch! If you feel yourself wincing when you open your insurance bills lately, it’s understandable. You’re not alone. Throughout the state of Florida, an insurance crisis is unfolding. Though it might be easy to blame your insurance agent or insurance carrier for the rate increases—it’s not their fault.
In this blog post, we’ll explain below what’s happening, tell you what the industry is doing about it, and what you can do as a consumer.
So, What’s Causing Rates to Rise So Rapidly?
According to the Insurance Information Institute, Assignment of Benefits (AOB) abuse has been a large contributing factor in insurance rate increases. This is when a third-party contractor solicits a consumer and offers to deal with the insurance company instead of the consumer to get repairs on a home. These repairs are often costly. Most times, the consumer is unaware the repairs are unnecessary and over-inflated. Often, homeowners are led by contractors (who position themselves as experts) to believe their home could suffer damage if the repairs aren’t performed.
Why AOB Abuse is Causing So Much Damage in Florida
Insurance companies have denied and continue to turn down many AOB claims for the reasons we mentioned above—they’re often unnecessary and unreasonably expensive. In response, Many Florida attorneys for these third -party vendors filed lawsuits against insurance companies for refusing to cover a claim. According to Insurance Information Institute data, these lawsuits have sharply increased since 2013 from 2,852 Florida property lawsuits in 2013 to 7,946 in 2018.
AOB abuse has become an industry of its own, involving third-party vendors and their attorneys.
Here’s how AOB abuse typically plays out:
A contractor solicits a homeowner who suspects they may need a repair. The homeowner hires the contractor to repair damage in their home or to replace their roof. The contractor then inflates the cost of the repair and overcharges the insurance company. The insurance company responds by disputing the claim, and attorneys for the contractor file a lawsuit against the insurance company.
AOB means that the insured (the homeowner) signs all of their rights over to the contractor. This means if there is a dispute in the claim, it’s up to the contractor to deal with it. The AOB can also give the contractor the right to sue the insurance company in the name of the homeowner.
When this happens, insurance companies are backed into a corner. Their only option is to pay skyrocketing legal fees. Often, they end up settling on a lawsuit to prevent legal costs from going even higher.
What’s the result?
Consumers Are Paying the Price—in Billions
Everyone needs insurance, so it’s frustrating when something you rely on rises rapidly in cost, almost overnight.
Frivolous claims and lawsuits are causing insurance companies to hemorrhage. The only way to stop the bleeding is to pass the costs onto the consumer.
That’s how this has become an insurance crisis.
More and More Homeowners Are Getting Non-Renewal Notices
It all seems so simple. Rates go up, so consumers shop for a new insurance company.
But what happens next can be a dangerous gamble…
Many homeowners are getting non-renewal notices and are being dropped by their insurance companies, usually national carriers. These are the big-name companies you hear about on TV commercials.
When calling for a quote over the phone, it appears simple. Until someone from the insurance company comes out to inspect the property. That’s where things take a turn in a downward direction.
Florida’s insurance market differs from the rest of the country. Requirements for roofs and structures are unique, because of hurricanes, heavy rains, and extreme sun and heat. Large national insurance companies are not accustomed to dealing with this.
Some Common Types of Claims That Drive Prices Up Are:
- Roof leaks
- Water damage from storms
- Appliance malfunctions causing possible water damage
- Roof age coverage
- Water loss claims
What Can Be Done?
Many in the insurance industry are pushing for legislation to stop AOB abuse and insurance fraud. State insurance consumer advocates are urging insurance agents to demand reform.
As a consumer, if you have an adjuster solicit you—it’s important to let your legislative lawmakers, state representatives, and senators know. If no one speaks up and gives feedback, change doesn’t happen. That means rates continue to increase.
We don’t believe contractors should be allowed to solicit door-to-door and assume peoples’ insurance policies. This is often where these fraudulent claims begin. Small business owners and consumers don’t understand what’s going on and why rates are so high, but this is where it all begins.
Before You Call a National Insurance Company, Talk to an Independent Agent
We care about our Florida clients. Because we aren’t loyal to any one company, we can shop over 100 carriers to find you the best insurance rates and coverage. We’re an independent company with customized advice and insurance plans.
While the larger, well-known insurance chains quote lower rates, they often cancel their clients due to information found after the home insurance inspection.
At Galezano Insurance, we know Florida and we know how to cover you best.
Talk to an agent at Galezano Insurance today. Call (239) 202-0233 or email margaret@galezano.com